Can someone please explain how the original 100 shares turned into 220? Does this mean that after borrowing a share and shorting it, the original owner and the one who shorted can both sell it?
Imagine three participants: Alice, Bob, and Charlie. Alice owns a share of Foo Corp, the only such share that exists. Bob decides to short Foo Corp, and borrows a share from Alice's broker (Alice's broker gets paid for this).
At that moment, there are two shares that exist. If Alice logs into her brokerage account, she sees a share of Foo Corp, but it's really an IOU for a share of Foo Corp. If Bob logs into his account, he also sees a share of Foo Corp (that he borrowed from Alice). At that point, there are two "shares" of Foo Corp that exist.
To make money on the short, Bob has to sell the share and buy it later, so he puts it in the market and sells it to Charlie. At this point, there are two shares: a share owned by Charlie and an IOU to Alice from Bob.
Bob could be very confident about shorting Foo Corp, so he could also borrow a share from Charlie's broker, at which point there would be three shares in existence: an IOU to Alice, an IOU to Charlie, and the sole share that exists. Each of these participants, if they log into their brokerage account, do see a share.
These phantom shares can't exist forever though: Bob is paying both Alice's and Charlie's brokers. Keep in mind that either Alice and Charlie can decide to sell their share, which Bob could then buy, at which point he could cover the remaining IOU, and everything would settle.
But then, what if both Alice and Charlie just bought the share and weren't planning to sell it? Bob would be in a position where he owes two shares but there are zero to buy on the market. Normally, that doesn't happen because shares are traded often enough, but in certain scenarios (short squeeze, collusion between participants) there might be issues. At that point, Bob can decide to keep on borrowing the shares until one sells, or maybe he runs out of cash to borrow shares and closes his account.
That's when things get a bit dicey. At this point, there are two "shares", one actual share and one IOU for a share. What happens is that Bob's broker is in a fail to deliver position. They're supposed to deliver a share of Foo Corp to close the IOU but there's no such share to deliver.
This is the thing I have been thinking about the last day. In theory if all the shares are bought, these buyers would technically be price setters and list an arbitrary high price. Could they?
If the shareholders decide to corner the market, the company could issue more shares or the SEC might step in and say "no you can't do that" to either the broker, the shareholders, or both.
I don't think the SEC looks very highly on people cornering the market, be it hedge funds colluding or individual investors colluding. The SEC is supposed to look for all investors, not just the ones that decided to corner the market in one security.
Of course there's many ETF's that aren't market-cap weighted, but the majority of funds/value is.
Now, of course, some of those shares are locked up by funds tracking, say the Russell 2000 index, which cannot liquidate their holdings (and may even be required to buy more as GME climbs) in order to maintain it's percentage in the fund. Other shares are held by other funds or institutions, and so on. So the reality is it is difficult for the shorts to cover quickly.
This isn't a problem during "normal times" because the volatility of the stock is relatively low and thus the short margin interest that you have to pay to keep borrowing the stock is a small percentage. But as the price runs up, that interest and collateral requirements grow dramatically since the broker needs to be sure you can pay up if you have to buy the shares at the current market price.